Locked into fixed-term mobile contract with variable prices? Not on our watch – Ofcom

Mobile operators who try to increase the price of a mobile phone contract during its term must now allow locked-in customers to escape, says Ofcom.

The regulator's new rules kick in from the end of January, and only apply to new contracts, but all operators offering fixed-term contracts will have to provide 30 days' notice and a get-out option for customers who don't want to pay extra for prices, effectively locking the price down for the duration.

The rules are a response to public complaints and a vigorous campaign from consumer rights magazine Which, as customers who'd signed up to pay (say) £10 a month were shocked to discover their subs were linked to the Retail Price Index measure of inflation, and thus didn't stay at £10 for very long.

Customers were not impressed, but the small print for virtually all mobile contracts permits such changes. Enraged customers demanded Ofcom do something; they promptly held a consultation on the issue in January, gathering responses from the industry and consumers, both of whom agreed there was a problem – though they disagreed over what should be done about it.

The operators' core argument, following attacks on Ofcom's methodology, motivation, and jurisdiction, is that the complaints were about the surprise, not the increase, so all people need is better advertising and bigger small print.

Consumers, however, disagreed and around three hundred of them pointed out that a “fixed-term contract” should have a fixed price, for its, er, term.

The operators also argued that fixed prices would lead to higher telecommunication costs - which is probably true, as operators will have to fund the risk they're taking in fixing the price. EE already offers a fixed price guarantee: for a premium of £1.50 a month it will lock a price for 24 months, but the operator points out that this would cost the punter £36, while the average RPI increase would only add £12 to the bill – so, according to them, the punter loses £24.

But it's not really a loss; it's the amount one pays to transfer the risk to the operator. One pays a little more to avoid taking a punt on next year's rate of inflation.

Operators argued that customers should have that option, but Ofcom declined to permit it and the core provision of all contracts will have to be offered at a fixed price. Operators will be permitted to change other pricing, for out-of-bundle or additional services, but the basic price (and offering: calls, text, data) will be required to remain the same, or the get-out clause kicks in.

Vodafone argued that this reduced flexibility would lead to shorter contracts and to a lower subsidy on smartphones. In turn, they said, this would deny poor people the joy of playing Angry Birds.

That's probably true, but an industry built on the never-never^* wasn't going to last indefinitely. Making customers pay for their electronics is, ironically enough, something the mobile industry has been trying to achieve for decades, so is probably no bad thing.

Ofcom's statement (pdf) is eminently readable, if a little long, but the gist is that from February 2014 we'll all have to pay a little more for our mobile contracts. At least we'll know they're not going to change for the duration. ®

Bootnote

^* The never-never: an old English colloquial phrase for pay-by-instalment schemes. Particularly applied to the popular hire-purchase offers of the mid-to-late 20th century.